Get Smarter

Let's talk bitcoin and blockchain people. Blocka-whaaat? That's right -surprise, surprise. Stan The Annuity Man is talking about something other than annuities.

I was recently speaking with one of the top financial journalists in the country about annuities and the current environment with the COVID-19 situation. This person writes a syndicated column, appears on TV regularly, and is the author of many best-selling books on personal finance.

I was hoping that I wouldn’t have to write this article, but I’m starting to receive “fear selling” email messages from some of the carriers, distributors, and many agents promoting annuities during these Coronavirus times. I’m sure the TV ads, radio ads, and direct mailers aren’t far behind.

Annuity sales continue to rise every quarter in the United States, and a lot of the credit for driving this consumer popularity is the Annuity Income Rider. So how do Annuity Income Riders work? Riders are separate benefits that you attach at the time of application.

One of my favorite sayings is “There are NO perfect annuity answers...just bad sales pitches.”

It’s kind of sad that the annuity category is experiencing somewhat of a renaissance during this Coronavirus crisis. It kind of makes sense that contractual guarantees become a little more attractive when the future is a tad hazy and unpredictable. In addition, stock market volatility always makes people reassess the overall risk in their portfolio.

In my opinion, annuities should not be looked at as investments. They are contracts issued by life insurance companies. Don’t believe me, then buy one and you will receive a contract (i.e. policy) in the mail.

Many investors are familiar with bond ladders or CD ladders, and might already have these types of strategies in their retirement plan. Laddering annuity contracts is a new concept to most people, but you should definitely be aware of these unique strategies for both lifetime income and principal protection.

The hottest “sounds too good to be true” and “best thing since sliced bread” product to hit the financial world in the past few years is the Fixed Index Annuity (FIA). Regardless of your specific financial goals, some agent or financial advisor will most likely pitch you this product…

Annuity sales continue to rise every quarter in the United States, and a lot of the credit for driving this consumer popularity is the Annuity Income Rider.

There is a reason 3 guys are wearing both “belts and suspenders” in the picture with this article. It’s not because I grew up in the south and that’s how my Uncle Joe looked at the family reunion! It’s due to the fact that some people mistakenly think using IRA money to fund annuities is duplicitous.

For people that enjoy reading the IRS tax code in their spare time, I would encourage you to flip to section 1035 and read about life insurance and annuity transfers. For those of you with a life, just let me explain the important details so it’s easy to understand.

What is an annuity? It is a transfer of risk contract that life insurance companies issue. Not all annuities are the same. The type of annuity you own will dictate what it contractually solves for.

During the last financial crisis in 2008, annuity companies weathered that storm very well and positioned themselves to take advantage of the demographic tidal wave of baby boomers looking for contractual guarantees.

I’ve learned the word “annuity” is a curse word in the financial industry. Perhaps some bad sales practices have helped with this bad reputation, or maybe it’s the constant “I Hate Annuities” ads that blanket all platforms. Many people that might need an annuity transfer of risk strategy have, unfortunately, opted not to learn more because of this unearned negative stigma.